13.03.202604:22 Forex Analysis & Reviews: Overview of the GBP/USD Pair. March 13. Do Not Believe the Rumors Surrounding the Fed

The GBP/USD currency pair also traded lower on Thursday and is now much closer to resuming its month-and-a-half downward trend than to restarting its one-and-a-half-year upward trend. We have repeatedly stated that the key reason for the pair's decline in recent weeks is geopolitics, while the market has ignored macroeconomic data (especially disappointing for the dollar). Therefore, theoretically, the U.S. currency can continue to rise solely on geopolitical factors, despite fundamentals and macroeconomic factors. Is this strange? Yes. But at the same time, it is also logical.

Some experts currently believe that the dollar is being supported by the Fed. If the conflict in the Middle East drags on for months or years, and a barrel of oil remains consistently priced above $100 (let alone $200), inflation will surge worldwide. This is especially true for the U.S. and the EU, whose central banks have been actively working to suppress high inflation in recent years. Right now, experts are lowering their expectations for the Fed's monetary easing in 2026, suggesting the total number of rate cuts may be lower than originally planned at the beginning of the year.

We consider this hypothesis fundamentally incorrect. First, it should be understood that the current rise in the dollar is no more than the market's "hawkish" expectations regarding the Fed. Second, one should remember not only the inflation but also the labor market and unemployment. Recent reports for February showed that no recovery is occurring in the U.S. labor market, even after three rounds of interest rate cuts. Inflation may indeed rise after a sharp spike in energy prices, but what about the labor market?

The labor market is not just numbers reflecting Americans' prosperity or purchasing power. It represents the number of Americans who (first and foremost) have lost jobs or cannot find work. Of course, an unemployment rate of 4.4% is relatively low, but at the same time, each month, either a negligible number of new jobs are created in America, or the opposite occurs—negative job growth. The dilemma facing the Fed is similar to the one it faced last autumn: what to choose—stimulating the labor market or controlling inflation? It is worth noting that back then, the Fed chose to prioritize stimulating the labor market. Given that these measures have proved insufficient, it is entirely possible that the U.S. regulator will continue to work in this direction.

Thus, in the near term, everything will depend on the situation in the Middle East, the blockade of the Strait of Hormuz, oil and gas prices, the safety of vessels in the Persian Gulf, new strikes by U.S. allies against Iran, and new strikes by Iran on refineries, LNG facilities, and tankers. The euro and the pound are at local bottoms, but the pace of decline for both currencies is not as strong as it was in early March.

The average volatility of the GBP/USD pair over the last 5 trading days is 95 pips, which is considered "average" for the pound/dollar pair. On Friday, March 13, we expect movement within a range limited by levels 1.3261 and 1.3451. The upper linear regression channel has flattened out, indicating a potential trend reversal. The CCI indicator has once again entered oversold territory, signaling an imminent end to the correction.

Nearest Support Levels:

S1 – 1.3306

S2 – 1.3184

S3 – 1.3062

Nearest Resistance Levels:

R1 – 1.3428

R2 – 1.3550

R3 – 1.3672

Trading Recommendations:

The GBP/USD currency pair has been correcting for a whole month, but its long-term prospects have not changed. Trump's policies will continue to exert pressure on the U.S. economy, so we do not expect the U.S. currency to grow in 2026. Therefore, long positions targeting 1.3916 and above remain relevant when the price is above the moving average. The position of the price below the moving average allows for considering small shorts targeting 1.3261 based on technical (correctional) grounds. In recent weeks, nearly all news and events have turned against the British pound, resulting in an extended correction.

Explanations for the Illustrations:

• Linear regression channels help determine the current trend. If both are directed in the same direction, it means the trend is currently strong;
• The moving average line (settings 20.0, smoothed) determines the short-term trend and the direction in which trading should currently be conducted;
• Murray levels – target levels for movements and corrections;
• Volatility levels (red lines) – the likely price channel in which the pair will operate over the next day, based on current volatility indicators;
• The CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a reversal of the trend in the opposite direction is approaching.